Interim Report (Incorporated in Bermuda with limited liability) Stock Code: 1196

Transcription

1 Interim Report 2017 (Incorporated in Bermuda with limited liability) Stock Code: 1196

2 CONTENTS Corporate Information 2 Condensed Consolidated Statement of Profit or Loss 3 Condensed Consolidated Statement of Comprehensive Income 4 Condensed Consolidated Statement of Financial Position 5 Condensed Consolidated Statement of Cash Flows 7 Condensed Consolidated Statement of Changes in Equity 8 Notes to the Interim Financial Information 9 Management Discussion and Analysis 33 Dividends 38 Directors and Chief Executives Interests and Short Positions in the Shares, Underlying Shares or Debentures of the Company or any Associated Corporations 39 Substantial Shareholders 40 Corporate Governance 43 Page

3 02 REALORD GROUP HOLDINGS LIMITED Interim Report 2017 CORPORATE INFORMATION BOARD OF DIRECTORS Executive Directors Lin Xiaohui (Chairman) Su Jiaohua (Chief Executive Officer) Lin Xiaodong Independent Non-executive Directors Yu Leung Fai Fang Jixin Li Jue COMPANY SECRETARY Chan Ying Kay LEGAL ADVISERS Michael Li & Co. INDEPENDENT AUDITOR Deloitte Touche Tohmatsu 35/F One Pacific Place 88 Queensway Hong Kong PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE MUFG Fund Services (Bermuda) Limited The Belvedere Building 69 Pitts Bay Road Pembroke HM08 Bermuda HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE Tricor Tengis Limited Level 22, Hopewell Centre 183 Queen s Road East Wanchai, Hong Kong HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS Suites /F, Jardine House 1 Connaught Place Central, Hong Kong REGISTERED OFFICE Clarendon House 2 Church Street Hamilton HM 11 Bermuda PRINCIPAL BANKERS The Hongkong and Shanghai Banking Corporation Limited Bank of China (Hong Kong) Limited China Merchants Bank AUDIT COMMITTEE Yu Leung Fai (Chairman) Fang Jixin Li Jue REMUNERATION COMMITTEE Li Jue (Chairman) Lin Xiaohui Yu Leung Fai NOMINATION COMMITTEE Lin Xiaohui (Chairman) Yu Leung Fai Fang Jixin STOCK CODE 1196 COMPANY WEBSITE

4 Interim Report 2017 REALORD GROUP HOLDINGS LIMITED 03 CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS for the six months ended 30 June 2017 For the six months ended 30 June 30 June (Unaudited) (Unaudited) Notes HK$ 000 HK$ 000 REVENUE 3 216,233 92,844 Cost of sales (163,953) (51,170) Gross profit 52,280 41,674 Other income, gains and losses 5 156, ,131 Selling and distribution expenses (2,141) (1,969) Administrative expenses (63,697) (58,520) Finance costs 6 (13,517) (5,809) PROFIT BEFORE TAX 7 129, ,507 Income tax expense 9 (42,395) (85,818) PROFIT FOR THE PERIOD 87,091 81,689 Attributable to: Owners of the Company 84,273 81,689 Non-Controlling interests 2,818 87,091 81,689 Earnings per share attributable to owners of the Company Basic 11 HK7.33 cents HK7.08 cents Diluted 11 HK7.26 cents HK7.08 cents

5 04 REALORD GROUP HOLDINGS LIMITED Interim Report 2017 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the six months ended 30 June 2017 For the six months ended 30 June 30 June (Unaudited) (Unaudited) HK$ 000 HK$ 000 PROFIT FOR THE PERIOD 87,091 81,689 OTHER COMPREHENSIVE INCOME/(LOSS) Item that may be reclassified to profit or loss in subsequent periods: Exchange differences on translation of foreign operations 21,289 (6,083) TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 108,380 75,606 Attributable to: Owners of the Company 105,463 75,606 Non-Controlling interests 2, ,380 75,606

6 Interim Report 2017 REALORD GROUP HOLDINGS LIMITED 05 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 June June 31 December (Unaudited) (Audited) Notes HK$ 000 HK$ 000 NON-CURRENT ASSETS Property, plant and equipment 97,833 78,649 Investment properties 12 1,273,376 1,106,525 Prepaid lease payments 5,177 Goodwill 34,440 2,100 Other intangible asset 13 4,400 4,400 Finance lease receivables 5,575 6,401 Available-for-sale investments 13,844 13,844 Deferred tax assets Prepayments and deposits 36,460 36,460 Total non-current assets 1,471,293 1,248,567 CURRENT ASSETS Inventories 107,650 6,999 Prepaid lease payments 115 Trade receivables 14 71, ,171 Receivables arising from securities broking , ,560 Prepayments, deposits and other receivables 87,514 16,644 Amount due from a related party 15 21,568 Finance lease receivables 2,779 2,619 Tax recoverable Equity investments at fair value through profit or loss 16 25,550 18,648 Bank balance held on behalf of clients 16,406 11,634 Restricted bank balance 4,312 4,171 Cash and cash equivalents 17 82,294 51,791 Total current assets 552, ,279 CURRENT LIABILITIES Trade payables 18 45,416 5,548 Payables arising from securities broking 18 36,189 19,884 Other payables and accruals 89,907 20,221 Interest-bearing bank borrowings , ,288 Tax payable 3,000 3,240 Total current liabilities 444, ,181

7 06 REALORD GROUP HOLDINGS LIMITED Interim Report 2017 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED) as at 30 June June 31 December (Unaudited) (Audited) Notes HK$ 000 HK$ 000 NET CURRENT ASSETS 107,760 60,098 TOTAL ASSETS LESS CURRENT LIABILITIES 1,579,053 1,308,665 NON-CURRENT LIABILITIES Deferred tax liabilities 216, ,972 Loans from ultimate holding company , ,596 Other payable 12,775 Total non-current liabilities 551, ,568 Net assets 1,027, ,097 EQUITY Equity attributable to owners of the Company Share capital , ,000 Reserves 892, ,097 1,007, ,097 Non-Controlling interests 19,899 Total equity 1,027, ,097

8 Interim Report 2017 REALORD GROUP HOLDINGS LIMITED 07 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS for the six months ended 30 June 2017 For the six months ended 30 June 30 June (Unaudited) (Unaudited) HK$ 000 HK$ 000 Net cash inflows/(outflows) from: Operating activities 41,080 (51,566) Investing activities Acquisition of subsidiaries (15,295) (307,948) Other investing activities (991) 587 (16,286) (307,361) Financing activities Proceeds received from loans from ultimate holding company 80, ,930 Other financing activities (88,625) (27,645) (7,966) 223,285 Increase/(Decrease) in cash and cash equivalents 16,828 (135,642) Cash and cash equivalents at beginning of period 43, ,541 Effect of foreign exchange rate changes 3,123 (597) Cash and cash equivalents at end of period 63,143 74,302 Cash and cash equivalents as stated in the condensed consolidated statement of financial position 82,294 82,090 Bank overdrafts (19,151) (7,788) Cash and cash equivalents as stated in the condensed consolidated statement of cash flows 63,143 74,302

9 08 REALORD GROUP HOLDINGS LIMITED Interim Report 2017 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six months ended 30 June 2017 Equity attributable to equity holders of the Company Share Share Asset Non- Share premium option revaluation Translation Retained controlling Total capital account reserve reserve reserve profits Total Interest equity HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 At 1 January , ,797 6,876 28,274 (6,005) 102, , ,412 Profit for the period 81,689 81,689 81,689 Other comprehensive expense: Exchange differences on translation of foreign operations (6,083) (6,083) (6,083) Total comprehensive (expense)/ income for the period (6,083) 81,689 75,606 75,606 Equity-settled share option arrangements 5,644 5,644 5,644 At 30 June 2016 (Unaudited) 115, ,797 12,520 28,274 (12,088) 183, , ,662 At 1 January , ,590 15,796 28,274 (35,470) 183, , ,097 Profit for the period 84,273 84,273 2,818 87,091 Other comprehensive income: Exchange differences on translation of foreign operations 21,190 21, ,289 Total comprehensive income for the period 21,190 84, ,463 2, ,380 Acquisition of subsidiaries 16,982 16,982 Equity-settled share option arrangements 3,813 3,813 3,813 At 30 June 2017 (Unaudited) 115, ,590 19,609 28,274 (14,280) 268,180 1,007,373 19,899 1,027,272

10 Interim Report 2017 REALORD GROUP HOLDINGS LIMITED 09 NOTES TO THE INTERIM FINANCIAL INFORMATION for the six months ended 30 June BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES The unaudited condensed consolidated interim financial information of Realord Group Holdings Limited (the Company ) and its subsidiaries (together referred to as the Group ) has been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Main Board Listing Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the Listing Rules ) and with Hong Kong Accounting Standard 34 Interim Financial Reporting, issued by the Hong Kong Institute of Certified Public Accountants ( HKICPA ). The unaudited condensed consolidated interim financial information has been prepared in accordance with the same accounting policies adopted in the annual financial statements for the year ended 31 December 2016, except for the adoption of the new standards and amendments to Hong Kong Financial Reporting Standards ( HKFRSs ), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations issued by HKICPA, as disclosed in note IMPACT OF NEW HONG KONG FINANCIAL REPORTING STANDARDS Adoption of new or amended HKFRSs In the current period, the Group has applied, for the first time, the following amendments to HKFRSs issued by the HKICPA, which are relevant to and effective for the Group s financial statements for the annual period beginning on or after 1 January Amendments to HKAS 12 Amendments to HKAS 7 Amendment to HKFRS 12 Income taxes Statement of cash flows Disclosure of interest in other entities The adoption of the amendments to HKFRS had no material impact on the Group s financial statements. The Group has not early adopted the new or amended HKFRSs that have been issued but are not yet effective.

11 10 REALORD GROUP HOLDINGS LIMITED Interim Report REVENUE Revenue represents the invoiced value of goods sold, after allowances for returns and trade discounts, the value of services rendered, commission income from securities broking, interest income from margin financing and rental income during the period. For the six months ended 30 June 30 June (Unaudited) (Unaudited) HK$ 000 HK$ 000 Sales of goods 162,837 43,618 Rendering of services 38,872 38,428 Commission income from securities broking 1,021 1,119 Interest income from margin financing 4,427 4,219 Rental income 9,076 5, ,233 92, SEGMENT INFORMATION The Group identifies its operating segments and prepares segment information based on the regular internal financial information reported to the Group s executive directors for their decisions about resources allocation to the Group s business components and for their review of these components performance. During the period under review, as a result of acquisition of subsidiaries, the Group has reassessed its operating segment, which resulted in separate disclosure of its environmental protection segment. The business components in the internal reporting to the executive directors are determined following the Group s operating segments, which are the same as the Group s reportable segments: (a) provision of financial printing, digital printing and other related services ( Commercial Printing Segment ); (b) manufacture and sale of hangtags, labels, shirt paper boards and plastic bags principally to manufacturers of consumer products ( Hangtag Segment ); (c) distribution and sales of motor vehicle parts ( Motor Vehicle Parts Segment ); (d) provision of securities brokerage services and margin financing ( Financial Services Segment ); (e) trading of electronic products and computer components ( Trading Segment ); (f) property investment ( Property Investment Segment ); and (g) dismantling and trading of scrap materials and acting as an agent by sourcing scrap materials ( Environmental Protection Segment ).

12 Interim Report 2017 REALORD GROUP HOLDINGS LIMITED SEGMENT INFORMATION (Continued) Segment performance is evaluated based on reportable segment profit or loss, which is a measure of adjusted profit or loss before tax. The adjusted profit or loss before tax is measured consistently with the Group s profit before tax except that bank interest income, fair value gains on equity investment at fair value through profit or loss, gain on disposal of equity investment at fair value through profit or loss, revaluation surplus on property, plant and equipment, corporate expenses, as well as finance costs are excluded from such measurement. Segment assets exclude available-for-sale investments, deferred tax assets, tax recoverable, pledged time deposit, restricted bank balance, cash and cash equivalents, equity investments at fair value through profit or loss, and other unallocated corporate assets as these assets are managed on a group basis. Segment liabilities exclude loans from ultimate holding company, interest-bearing bank borrowings except for import invoice financing and overdraft, tax payable, deferred tax liabilities and other unallocated corporate liabilities as these liabilities are managed on a group basis. Inter-segment sales and transfers are transacted with reference to the prevailing market prices.

13 12 REALORD GROUP HOLDINGS LIMITED Interim Report SEGMENT INFORMATION (Continued) Information regarding the Group s reportable operating segments as provided to the Group s executive directors is set out below: Six months ended 30 June 2017 Motor Commercial Vehicle Financial Property Environmental Printing Hangtag Parts Services Trading Investment Protection Total (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Segment revenue Sales to external customers 38,872 1,608 19,346 5,448 9, , ,233 Inter-segment sales Reconciliation: Elimination of inter-segment sales 39,460 1,608 19,346 5,457 9, , ,830 (597) 216,233 Segment results 380 (60) 138 1,881 (116) 150,777 7, ,953 Reconciliation: Bank interest income 30 Fair value gains on equity investments at fair value through profit or loss held for trading 9,909 Gain on disposal of equity investments at fair value through profit or loss held for trading 2,015 Revaluation surplus on property, plant and equipment 1,860 Corporate expenses (31,764) Finance costs (13,517) Profit before tax 129,486

14 Interim Report 2017 REALORD GROUP HOLDINGS LIMITED SEGMENT INFORMATION (Continued) Motor Commercial Vehicle Financial Property Environmental Printing Hangtag Parts Services Trading Investment Protection Total (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ June 2017 Segment assets 20,307 1, , , ,304, ,462 1,784,585 Reconciliation: Corporate and unallocated assets 239,228 Total assets 2,023,813 Segment liabilities 17, ,696 37,408 3,496 96, ,091 Reconciliation: Corporate and unallocated liabilities 786,450 Total liabilities 996,541 Other segment information: Depreciation ,410 Fair value gain on investment properties (144,070) (144,070) Capital expenditure* * Capital expenditure consists of additions to property, plant and equipment.

15 14 REALORD GROUP HOLDINGS LIMITED Interim Report SEGMENT INFORMATION (Continued) Motor Commercial Vehicle Financial Property Printing Hangtag Parts Services Trading Investment Total (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Six months ended 30 June 2016 Segment revenue Sales to external customers 38,428 4,777 38,841 5,338 5,460 92,844 Intersegment sales ,675 4,777 38,841 5,338 5,460 93,091 Reconciliation: Elimination of intersegment sales (247) 92,844 Segment results 414 (409) 1,692 1,149 (357) 179, ,617 Reconciliation: Bank interest income 961 Fair value gains on equity investments at fair value through profit or loss held for trading 8,542 Revaluation surplus on property, plant and equipment 1,555 Corporate expenses (19,359) Finance costs (5,809) Profit before tax 167,507

16 Interim Report 2017 REALORD GROUP HOLDINGS LIMITED SEGMENT INFORMATION (Continued) Motor Commercial Vehicle Financial Property Printing Hangtag Parts Services Trading Investment Total (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ December 2016 Segment assets 12,417 1, , , ,136,472 1,435,271 Reconciliation: Corporate and unallocated assets 172,575 Total assets 1,607,846 Segment liabilities 12,882 1,007 55,115 20, ,831 94,839 Reconciliation: Corporate and unallocated liabilities 614,910 Total liabilities 709,749 Other segment information: Depreciation 1, ,082 Fair value gain on investment properties (270,479) (270,479) Gain on disposal of items of property, plant and equipment (5) (5) Capital expenditure* , ,703 * Capital expenditure consists of additions to property, plant and equipment.

17 16 REALORD GROUP HOLDINGS LIMITED Interim Report OTHER INCOME, GAINS AND LOSSES For the six months ended 30 June 30 June (Unaudited) (Unaudited) HK$ 000 HK$ 000 Other income Interest income Finance lease interest income Others 1, ,931 1,306 Gains and losses Gain on disposal of items of property, plant and equipment 32 Fair value gain on investment properties 144, ,005 Revaluation surplus on property, plant and equipment 1,860 1,555 Gain on disposal of equity investments at fair value through profit or loss held for trading 2,015 Fair value gain on equity investments at fair value through profit or loss held for trading 9,909 8,542 Exchange (loss)/gain, net (3,224) 4, , , , , FINANCE COSTS For the six months ended 30 June 30 June (Unaudited) (Unaudited) HK$ 000 HK$ 000 Interest charges on bank loans, overdrafts and other borrowings 3,001 1,487 Interest charges on loans from ultimate holding company 10,516 4,322 13,517 5,809

18 Interim Report 2017 REALORD GROUP HOLDINGS LIMITED PROFIT BEFORE TAX The Group s profit before tax is arrived at after charging/(crediting): For the six months ended 30 June 30 June (Unaudited) (Unaudited) HK$ 000 HK$ 000 Depreciation 5,096 3,977 Direct operating expenses (including repairs and maintenance) arising from rental-earning investment properties Employee benefit expense (including directors emoluments) 32,010 27,839 Equity-settled share option expenses 3,813 5,644 Minimum lease payments under operating leases 10,762 10, ACQUISITION OF ASSETS THROUGH ACQUISITION OF SUBSIDIARIES For the six months ended 30 June 2016 (a) On 26 January 2016, the Group acquired 100% equity interest in Excellent Well (H.K.) Limited ( Excellent Well ), from an independent third party, at a cash consideration of HK$25,834,000. Excellent Well is engaged in investment holding. (b) On 24 June 2016, the Group completed the acquisition of Citibest Global Limited and its subsidiary ( Citibest Group ), from an independent third party, at a cash consideration of HK$284,553,000. Citibest Group is engaged in investment holding. All of the above transactions were accounted for as purchases of assets and liabilities rather than as business combinations because Excellent Well and Citibest Group have not carried out any significant business transactions prior to the date of acquisition.

19 18 REALORD GROUP HOLDINGS LIMITED Interim Report ACQUISITION OF ASSETS THROUGH ACQUISITION OF SUBSIDIARIES (Continued) For the six months ended 30 June 2016 continued The assets and liabilities acquired in the above acquisitions are as follows: Excellent Well (Audited) HK$ 000 Investment property 25,800 Prepayments and deposits 34 Net assets 25,834 Satisfied by cash 25,834 Net outflow of cash and cash equivalents (25,834) Citibest Group (Audited) HK$ 000 Investment property 283,797 Cash and bank balances 2,439 Shareholder s loan (35,354) Other payables and accruals (1,683) Net assets 249,199 Assignment of shareholder s loan 35,354 Satisfied by cash 284,553 Cash consideration (284,553) Cash and bank balances acquired 2,439 Net outflow of cash and cash equivalents (282,114)

20 Interim Report 2017 REALORD GROUP HOLDINGS LIMITED INCOME TAX EXPENSE Hong Kong profits tax has been provided at the rate of 16.5% (2016: 16.5%) on the estimated assessable profits for the six months ended 30 June Taxes on estimated assessable profits elsewhere have been calculated at the rates of tax prevailing in the countries in which the Group operates. For the six months ended 30 June 30 June (Unaudited) (Unaudited) HK$ 000 HK$ 000 Current tax Hong Kong Current tax Mainland China Deferred tax 41,552 85,339 42,395 85, DIVIDENDS The directors do not recommend the payment of interim dividend for the six months ended 30 June 2017 (2016: Nil). 11. EARNINGS PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY The calculation of the basic earnings per share is based on the profit for the period attributable to ordinary equity holders of the Company and the weighted average number of ordinary shares in issue during the period. The calculation of the diluted earnings per share is based on the profit for the period attributable to ordinary equity holders of the Company, as used in the basic earnings per share calculation. The weighted average number of ordinary shares used in the calculation is the number of ordinary shares in issue during the period, as used in the basic earnings per share calculation, and the weighted average number of ordinary shares assumed to have been issued at nil consideration on the deemed exercise of all dilutive potential ordinary shares arising from share options into ordinary shares. The calculations of the basic and diluted earnings per share are based on: Six months Six months ended ended 30 June 30 June (Unaudited) (Unaudited) HK$ 000 HK$ 000 Earnings Profit attributable to owners of the Company, used in the basic and diluted earnings per share calculations 84,273 81,689

21 20 REALORD GROUP HOLDINGS LIMITED Interim Report EARNINGS PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY (Continued) Number of shares Six months Six months ended ended 30 June 30 June (Unaudited) (Unaudited) Shares Weighted average number of ordinary shares in issue during the period used in the basic earnings per share calculations 1,150,001,398 1,153,491,398 Effect of dilution weighted average number of ordinary shares: Share options 10,160,000 1,160,161,398 1,153,491,398 The Company s share options have no dilutive effect for the six months ended 30 June 2016 because the exercise price of the Company s share options was higher than the average market price of the Company s share during the period. 12. INVESTMENT PROPERTIES HK$ 000 Carrying amount at 1 January ,900 Acquisition of assets through acquisition of subsidiaries (note 8) 309,597 Fair value gain 270,479 Exchange realignment (26,451) Carrying amount at 31 December 2016 (Audited) 1,106,525 Fair value gain 144,070 Exchange realignment 22,781 Carrying amount at 30 June 2017 (Unaudited) 1,273,376 At 30 June 2017, the Group s investment properties with a carrying value of HK$421,650,000 (31 December 2016: HK$396,325,000) were pledged to secure general banking facilities granted to the Group; while the Group s investment properties with a carrying value of HK$280,453,000 (31 December 2016: Nil) was pledged to secure general banking facilities granted to a company jointly owned by Dr. Lin Xiaohui ( Dr. Lin ) and Madam Su Jiaohua ( Madam Su ), both being the directors of the Group, in return for unsecured loan facilities provided by the ultimate holding company of the Group. Details of the arrangement are set out in note 24(b).

22 Interim Report 2017 REALORD GROUP HOLDINGS LIMITED OTHER INTANGIBLE ASSET 30 June 31 December (Unaudited) (Audited) HK$ 000 HK$ 000 Trading right 4,400 4,400 The trading right has been considered to have an indefinite life because it is expected to contribute net cash inflow to the Group indefinitely, and is not amortised. 14. TRADE RECEIVABLES/RECEIVABLES ARISING FROM SECURITIES BROKING 30 June 31 December (Unaudited) (Audited) HK$ 000 HK$ 000 Trade receivables 71, ,171 Impairment 71, ,171 Receivables arising from securities broking conducted in the ordinary course of business: Cash clients 20,717 9,033 Loans to margin clients 111, ,527 Clearing house Receivables arising from securities broking 132, ,560 Total trade receivables and receivables arising from securities broking 204, ,731 The Group s trading terms with its customers are mainly on credit, except for new customers, where payment in advance is normally required. The credit periods are generally one month to three months. Each customer has a maximum credit limit. The Group seeks to maintain strict control over its outstanding receivables to minimise credit risk. Overdue balances are reviewed regularly by senior management.

23 22 REALORD GROUP HOLDINGS LIMITED Interim Report TRADE RECEIVABLES/RECEIVABLES ARISING FROM SECURITIES BROKING (Continued) An aged analysis of trade receivables and receivables arising from securities broking as at the end of the reporting period, based on the invoiced date and net of provisions, is as follows: 30 June 31 December (Unaudited) (Audited) HK$ 000 HK$ 000 Current to 30 days 35,739 42, to 60 days 5,306 9, to 90 days 9,334 7,473 Over 90 days 42,000 77,460 92, ,204 Loans to margin clients # 111, , , ,731 # The loans to margin clients are secured by the underlying pledged securities, are repayable on demand and bear interest at commercial rates. No aged analysis is disclosed as, in the opinion of the directors, an aged analysis is not relevant in view of the nature of the business of securities margin financing. 30 June 2017, the total market value of securities pledged as collateral in respect of the loans to margin clients was approximately HK$282,510,000 (31 December 2016: HK$326,083,000). 15. AMOUNT DUE FROM A RELATED PARTY Amount due from a related party is unsecured, non-interest bearing and repayable on demand. The related party is a non-controlling shareholder of the Group who is a director of a subsidiary of the Company. 16. EQUITY INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS 30 June 31 December (Unaudited) (Audited) HK$ 000 HK$ 000 Listed equity investments, at market value 25,550 18,648

24 Interim Report 2017 REALORD GROUP HOLDINGS LIMITED CASH AND CASH EQUIVALENTS Cash and cash equivalents include the following components: 30 June 31 December (Unaudited) (Audited) HK$ 000 HK$ 000 Cash and bank balance 81,999 55,962 Time deposits 4,607 86,606 55,962 Less: Restricted bank balance* (4,312) (4,171) Cash and cash equivalents 82,294 51,791 * Bank balance of HK$4,312,000 (31 December 2016: HK$4,171,000) was restricted as to use as a result of a freezing injunction granted by a court in the PRC, following a legal action taken by a third party. 18. TRADE PAYABLES/PAYABLES ARISING FROM SECURITIES BROKING 30 June 31 December (Unaudited) (Audited) HK$ 000 HK$ 000 Trade payables 45,416 5,548 Payables arising from securities broking conducted in the ordinary course of business: Cash clients accounts payable 34,074 19,667 Clearing house 2, Payables arising from securities broking 36,189 19,884 Total trade payables and payables arising from securities broking 81,605 25,432

25 24 REALORD GROUP HOLDINGS LIMITED Interim Report TRADE PAYABLES/PAYABLES ARISING FROM SECURITIES BROKING (Continued) An aged analysis of trade payables and payables arising from securities broking as at the end of the reporting period, based on invoice date, is as follows: 30 June 31 December (Unaudited) (Audited) HK$ 000 HK$ 000 Current to 30 days 14,056 1, to 60 days 12, to 90 days 13, Over 90 days 7,617 3,059 47,531 5,765 Cash clients accounts payable 34,074 19,667 81,605 25,432 The trade payables are non-interest-bearing and are normally settled on 60-day terms. Included in the cash clients accounts payable arising from dealing in securities conducted in the ordinary course of business is an amount of approximately HK$16,821,000 (31 December 2016: HK$12,269,000) representing those clients undrawn monies/excess deposits placed with the Group. As at 30 June 2017, the cash clients accounts payable included an amount of HK$132,000 (31 December 2016: HK$132,000) in respect of certain directors undrawn monies/excess deposits placed with the Group. The cash clients accounts payable are repayable on demand and non-interest bearing. No aged analysis is disclosed as, in the opinion of the directors, an aged analysis is not meaningful in view of the nature of the business of dealing in securities. 19. SHARE CAPITAL 30 June 31 December (Unaudited) (Audited) HK$ 000 HK$ 000 Authorised: 20,000,000,000 ordinary shares of HK$0.10 each 2,000,000 2,000,000 Issued and fully paid: 1,150,001,398 ordinary shares of HK$0.10 each 115, ,000

26 Interim Report 2017 REALORD GROUP HOLDINGS LIMITED INTEREST-BEARING BANK BORROWINGS 30 June December 2016 Effective Effective interest (Unaudited) interest (Audited) rate (%) Maturity HK$ 000 rate (%) Maturity HK$ 000 Current Bank loan secured Loan Prime Rate ( LPR ) +2.1% p.a. Within 1 year 25,339 LPR +2.1% p.a. Within 1 year 24,549 Bank loan secured Fixed Rate 5.22% to 5.65% Within 1 year 19,580 N/A N/A Bank loans secured Hong Kong Interbank Offered Rate ( HIBOR ) +1.4% to 1.5% p.a. Within 1 year or on demand 206,178 HIBOR +1.25% to 1.5% p.a. Within 1 year or on demand 217,140 Bank overdraft secured HIBOR +1.5% p.a. Within 1 year or on demand 19,151 HIBOR +1.5% p.a. Within 1 year or on demand 8, , , June 31 December (Unaudited) (Audited) HK$ 000 HK$ 000 Analysed into: Bank loans and overdraft repayable: Within one year or on demand 270, ,288 Notes: (a) The Group s banking facilities amounted to HK$336,369,000 (31 December 2016: HK$315,999,000), of which HK$270,248,000 (31 December 2016: HK$250,288,000) had been utilised as at the end of the reporting period. (b) Certain of the Group s bank loans and overdraft were secured by the Company s guarantee of up to HK$291,450,000 (31 December 2016: HK$291,450,000) and a mortgage over the Group s investment properties situated in Hong Kong, which had a carrying value at the end of the reporting period of HK$421,650,000 (31 December 2016: HK$396,325,000) and mortgages over the Group s leasehold land and buildings with a carrying value at the end of the reporting period of HK$48,259,000 (31 December 2016: HK$45,812,000). (c) Certain of the Group s bank loans amounted to HK$19,580,000 were secured by the personal guarantee given by the third parties and the mortgage of their personal properties. (d) Except for the secured bank loan of HK$44,919,000 (31 December 2016: HK$24,549,000) which is denominated in RMB, all bank borrowings are denominated in Hong Kong dollars.

27 26 REALORD GROUP HOLDINGS LIMITED Interim Report LOANS FROM ULTIMATE HOLDING COMPANY The loans from ultimate holding company were unsecured, interest bearing at 8.2% per annum and not repayable within 12 months from the end of the reporting period. 22. OPERATING LEASE COMMITMENTS 30 June 31 December (Unaudited) (Audited) HK$ 000 HK$ 000 Within one year 18,386 18,640 In the second to fifth year, inclusive 7,390 17,184 25,776 35, CAPITAL COMMITMENTS 30 June 31 December (Unaudited) (Audited) HK$ 000 HK$ 000 Contracted for but not provided: Equity investment 403, ,594 Investment property 1,955 1, , ,549

28 Interim Report 2017 REALORD GROUP HOLDINGS LIMITED RELATED PARTY TRANSACTIONS (a) Transactions with related parties: (i) The Group had finance lease receivables due from a company jointly owned by Dr. Lin and Madam Su, both of whom are directors and substantial shareholders of the Company. The Group received interest income arising from such finance lease receivables amounting to HK$369,000 during the six months ended 30 June 2017, (2016: HK$247,000) which was based on the prevailing market rate. (ii) The Group had loans from ultimate holding company, Manureen Holdings Limited ( MHL ), which is jointly owned by Dr. Lin and Madam Su, both of whom are directors of the Company. The Group paid interest expenses arising from such loans amounting to HK$10,516,000 during the six months ended 30 June 2017 (2016: HK$4,322,000), which was based on the prevailing market rate. (b) Loans from ultimate holding company: During the six months ended 30 June 2017, the Group entered into a loan agreement with its ultimate holding company, MHL, where MHL will provide the Group unsecured loan facilities of up to RMB450 million. At the same time, the Group has provided the corporate guarantee and property pledge to a bank in the PRC for provision of a loan facility to a company jointly owned by Dr. Lin and Madam Su. As Dr. Lin and Madam Su are the directors and controlling shareholders of the Group, it constituted a connected transaction as defined in Chapter 14A of Listing Rules. For details, it could be referred to the circular of the Group dated 27 January The carrying amounts of the balances approximately to their fair values. Terms of the loans are shown in note 21. (c) Compensation of key management personnel of the Group: For the six months ended 30 June 30 June (Unaudited) (Unaudited) HK$ 000 HK$ 000 Short term employee benefits 4,795 2,940 Post-employment benefits Equity-settled share option expenses 1,749 2,248 6,571 5,215

29 28 REALORD GROUP HOLDINGS LIMITED Interim Report ACQUISITION OF REALORD ENVIRONMENTAL PROTECTION On 28 February 2017, the Group acquired 60% equity interest in Realord Environmental Protection Industrial Company Limited ( Realord Environmental Protection ) (formerly known as Top Eagle International Trading Limited ), Realord Environmental Protection acts as an investment holding company and acts as agent of sourcing scrap materials. The acquisition was made as part of the Group s strategy to participate in the environmental protection industry and allow the Group to diversify from its existing businesses. The purchase consideration for the acquisition, in the form of cash of HK$25,000,000 and new shares to be allotted and issued by the Company as to a maximum of HK$35,000,000. Cash consideration was fully settled during the period. 28 February 2017 (Unaudited) HK$ 000 Assets and liabilities acquired: Property, plant and equipment 18,898 Prepaid lease payment 5,120 Inventories 87,750 Trade receivables 13,235 Prepayments, deposits and other receivables 65,376 Tax recoverable 3,669 Cash and cash equivalents 9,705 Amount due to a non-controlling shareholder (66,394) Other payables and accruals (84,334) Interest-bearing bank borrowings (9,520) Tax payables (7,486) Deferred tax liabilities (827) Total identifiable net assets at fair value 35,192 Non-controlling interest (16,982) Goodwill on acquisition 32,340 50,550 Satisfied by: Cash 25,000 Consideration payables 25,550 50,550 An analysis of the cash flows in respect of the acquisition is as follows: Cash consideration (25,000) Cash and bank balances acquired 9,705 (15,295)

30 Interim Report 2017 REALORD GROUP HOLDINGS LIMITED FINANCIAL INSTRUMENTS BY CATEGORY (a) The carrying amounts of each category of financial instruments as at the end of the reporting period are as follows: 30 June 2017 Financial assets Financial assets at fair Availablevalue through for-sale profit or loss Loans and financial held for trading receivables assets Total (Unaudited) (Unaudited) (Unaudited) (Unaudited) HK$ 000 HK$ 000 HK$ 000 HK$ 000 Available-for-sale investments 13,844 13,844 Trade receivables 71,662 71,662 Receivables arising from securities broking 132, ,623 Financial assets included in prepayments, deposits and other receivables 13,485 13,485 Finance lease receivables 8,354 8,354 Equity investments at fair value through profit or loss 25,550 25,550 Bank balance held on behalf of clients 16,406 16,406 Restricted bank balance 4,312 4,312 Cash and cash equivalents 82,294 82,294 25, ,136 13, ,530 Financial liabilities Financial liabilities at amortised cost (Unaudited) HK$ 000 Trade payables 45,416 Payables arising from securities broking 36,189 Financial liabilities included in other payables and accruals 6,439 Loans from ultimate holding company 322,255 Interest-bearing bank borrowings 270, ,547

31 30 REALORD GROUP HOLDINGS LIMITED Interim Report FINANCIAL INSTRUMENTS BY CATEGORY (Continued) (a) The carrying amounts of each category of financial instruments as at the end of the reporting period are as follows: (Continued) 31 December 2016 Financial assets Financial assets at fair Availablevalue through for-sale profit or loss Loans and financial held for trading receivables assets Total (Audited) (Audited) (Audited) (Audited) HK$ 000 HK$ 000 HK$ 000 HK$ 000 Available-for-sale investments 13,844 13,844 Trade receivables 127, ,171 Receivables arising from securities broking 119, ,560 Financial assets included in prepayments, deposits and other receivables 21,461 21,461 Finance lease receivables 9,020 9,020 Equity investments at fair value through profit or loss 18,648 18,648 Bank balance held on behalf of clients 11,634 11,634 Restricted bank balance 4,171 4,171 Cash and cash equivalents 51,791 51,791 18, ,808 13, ,300 Financial liabilities Financial liabilities at amortised cost (Audited) HK$ 000 Trade payables 5,548 Payables arising from securities broking 19,884 Financial liabilities included in other payables and accruals 8,743 Loans from ultimate holding company 241,596 Interest-bearing bank borrowings 250, ,059

32 Interim Report 2017 REALORD GROUP HOLDINGS LIMITED FINANCIAL INSTRUMENTS BY CATEGORY (Continued) (b) Fair value measurement recognised in the condensed consolidated statement of financial position All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 Level 2 Level 3 based on quoted prices (unadjusted) in active markets for identical assets or liabilities based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable, either directly or indirectly based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. The following tables illustrate the fair value measurement hierarchy of the Group financial instruments: Assets measured at fair value: 30 June 2017 Fair value measurement using Quoted prices Significant Significant in active observable unobservable markets inputs inputs (Level 1) (Level 2) (Level 3) Total (Unaudited) (Unaudited) (Unaudited) (Unaudited) HK$ 000 HK$ 000 HK$ 000 HK$ 000 Available-for-sale investments 13,844 13,844 Equity investments at fair value through profit or loss 25,550 25,550 39,394 39,394

33 32 REALORD GROUP HOLDINGS LIMITED Interim Report FINANCIAL INSTRUMENTS BY CATEGORY (Continued) (b) Fair value measurement recognised in the condensed consolidated statement of financial position (Continued) Assets measured at fair value: (Continued) 31 December 2016 Fair value measurement using Quoted prices Significant Significant in active observable unobservable markets inputs inputs (Level 1) (Level 2) (Level 3) Total (Audited) (Audited) (Audited) (Audited) HK$ 000 HK$ 000 HK$ 000 HK$ 000 Available-for-sale investments 13,844 13,844 Equity investments at fair value through profit or loss 18,648 18,648 32,492 32,492 The Group did not have any financial liabilities measured at fair value as at 30 June 2017 and 31 December CONTINGENT LIABILITIES Citibest and Guan Zhang, subsidiaries of the Group, are currently defendants in a lawsuit brought by a third party, 深圳市沪田利商貿有限公司 (Shenzhen Shi Hui Tian Li Business Trading Company Limited), alleging that Citibest and Guan Zhang are liable to settle an outstanding payment of approximately RMB25 million and interest accrued thereon. As the litigation is awaiting for trial by the court in the PRC, the directors have not provided for any claim arising from the litigation, other than the related legal and other costs.

34 Interim Report 2017 REALORD GROUP HOLDINGS LIMITED 33 MANAGEMENT DISCUSSION AND ANALYSIS BUSINESS REVIEW Recent Development The principal activities of the Group during the period under review included the provision of financial printing, digital printing and other related services ( Commercial Printing Segment ), manufacture and sale of hangtags, labels, shirt paper boards and plastic bags ( Hangtag Segment ), distribution and sale of motor vehicle parts ( Motor Vehicle Parts Segment ), provision of securities brokerage services and margin financing ( Financial Services Segment ), trading of electronic products, computer equipment and consumer products ( Trading Segment ), property investment ( Property Investment Segment ), and dismantling and trading of scrap materials and acting as an agent by sourcing scrap material ( Environmental Protection Segment ). On 23 May 2016, the Group entered into an agreement with 5 other independent third parties, pursuant to which the parties agreed to set up a security company ( Security Company ) in Guangzhou Pilot Free Trade Zone, Nanshan area in the PRC, to carry out securities businesses in the PRC. Pursuant to the agreement, upon establishment of the Security Company, the Group agreed to subscribe for 350,000,000 shares of the Security Company in cash, representing 10% equity interests thereof, at an aggregate subscription price of RMB350 million. The establishment of the Security Company is pending for the approval of the China Securities Regulatory Commission and other relevant regulatory authorities in the PRC. On 5 September 2016, the Group and Fortune Victory Asia Corporation ( Fortune Victory ), an independent third party, entered into an acquisition agreement, pursuant to which the Group has conditionally agreed to acquire, and Fortune Victory has conditionally agreed to sell 60% of the issued share capital of Top Eagle International Trading Limited, which in turn holds the entire equity interest in 廣西梧州市通寶再生物資有限公司 (Guangxi Wuzhou City Tong Bao Renewable Materials Limited*) ( Tong Bao ), which is principally engaged in the business of dismantling and trading of scrap materials. The acquisition was completed on 28 February As disclosed in the announcement of the Company dated 8 June 2017, the Group and 梧州進口再生資源加工園區管理委員會 (Wuzhou Import Renewable Resources Processing Park Management Committee*) ( Park Management Committee ) entered into the investment agreement pursuant to which the Group will design, develop and build a processing plant for the recycling and production of aluminium ingots on the site in the 梧州進口再生資源加工園區 (Wuzhou Import Renewable Resources Processing Park*) located in Wuzhou City, Guangxi Province, the PRC. The target annual production capacity of the project will reach 100,000 tonnes to be ramped up in two phases. The total investment amount as indicated in the investment agreement for the project is approximately RMB350 million (equivalent to approximately HK$ million), including all cost but not limited to acquisitions of the site, construction of the processing plant and office premises, plant and machinery acquisitions. *For identification purpose only

35 34 REALORD GROUP HOLDINGS LIMITED Interim Report 2017 MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED) BUSINESS REVIEW (Continued) General Review During the period under review, as a result of the completion of the acquisition of Tong Bao as mentioned in the Recent Development section, the management had separately disclosed the Environmental Protection Segment due to the new operation and also increase in trading income received by the Group. For the period under review, the Group recorded a turnover of approximately HK$216.2 million for the six months ended 30 June 2017, representing a significant increase by 133.0% compared with the turnover of approximately HK$92.8 million recorded for the six months ended 30 June Gross profit margin of the Group decreased from approximately 44.9% for the six months ended 30 June 2016 to approximately 24.2% for the period under review. The Group s results increased from profit of approximately HK$81.7 million for the six months ended 30 June 2016 to profit of approximately of HK$87.1 million for the period under review. The increase in the turnover of the Group was primarily due to the Group consolidating the operating performance attributable to the Environmental Protection Segment, amounted to approximately HK$141.9 million since the acquisition of Realord Environmental Protection. The overall decrease in the gross margin was due to the low gross profit margin achieved by Environmental Protection Segment, which contributed the majority part of the turnover of the Group. The increase in profit attributable to the equity holders was mainly due to the fair value gain on investment properties amounted to approximately HK$144.1 million, but partly offset by the related deferred taxation of the fair value gain of approximately HK$41.6 million and also the increase in corporate expenses. Business Operation The Commercial Printing Segment recorded a revenue of approximately HK$38.9 million during the period under review, representing 18.0% of the total revenue of the Group. There was a slight increase in segment revenue of 1.2% to approximately HK$38.9 million as compared to approximately HK$38.4 million in the last corresponding period. However, the inflating operating cost resulted in similar level of operating profit of approximately HK$0.4 million for the period under review and the last corresponding period. The Hangtag Segment recorded a revenue of approximately HK$1.6 million during the period under review, representing 0.7% of the total revenue of the Group. The segment revenue decreased significantly of 66.3% from the last corresponding period of approximately HK$4.8 million to approximately HK$1.6 million for the period under review. Through implementation of continuing cost control measures, including outsourcing part of manufacturing processes, the loss from this segment remained at a low level of HK$0.1 million during the period under review comparing to approximately HK$0.4 million in the last corresponding period.

36 Interim Report 2017 REALORD GROUP HOLDINGS LIMITED 35 MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED) BUSINESS REVIEW (Continued) Business Operation (Continued) The Motor Vehicle Parts Segment recorded a revenue of approximately HK$19.3 million during the period under review, representing 9.0% of the total revenue of the Group. With a view of tightening the credit control policy and shortening of credit period granted to the customers, the segment revenue noted a significant decrease by 50.2% to approximately HK$19.3 million as compared to approximately HK$38.8 million in the last corresponding period. The segment recorded a profit of approximately HK$0.1 million during the period under review as compared to a profit of approximately HK$1.7 million in the last corresponding period. The Financial Services Segment recorded a revenue of approximately HK$5.4 million during the period under review, representing 2.5% of the total revenue of the Group. The revenue from this segment remained stable as compared from approximately HK$5.3 million in the last corresponding period to approximately HK$5.4 million during the period under review. The segment results increased from profit of approximately HK$1.1 million in the last corresponding period to profit of approximately HK$1.9 million during the period under review. The newly acquired Environment Protection Segment recorded a revenue of approximately HK$141.9 million during the period under review, representing 65.6% of total revenue of the Group. The segment result was profit of approximately HK$8.0 million during the period under review. As a result of the thin margin in Trading Segment, the Group did not generate any revenue from the segment, in both periods. Instead, the Group was in the progress to source some products with better margin and returns. The loss from this segment decreased from approximately HK$0.4 million in the last corresponding period to approximately HK$0.1 million during the period under review. The Property Investment Segment recorded a revenue of approximately HK$9.1 million during the period under review, representing 4.2% of the total revenue of the Group. The revenue from this segment recorded approximately HK$9.1 million as compared to approximately HK$5.5 million in the last corresponding period. The profit from this segment decreased from approximately HK$179.1 million in the last corresponding period to approximately HK$150.8 million during the period under review. The decrease was mainly due to the fair value gain on investment properties being recorded during the period under review amounted to approximately HK$144.1 million was less than that in the last corresponding period. The Group has invested in listed securities in Hong Kong for investment purpose. The financial assets of the Group recorded a total gain of HK$11.9 million for the period under review. 30 June 2017, the fair value of the financial assets amounted to approximately HK$25.6 million.

37 36 REALORD GROUP HOLDINGS LIMITED Interim Report 2017 MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED) FINANCIAL REVIEW Liquidity and financial resources The Group generally finances its operations with internally generated cashflow, cash reserve and banking facilities and facility provided by the ultimate holding company. During the period under review, the Group was financially sound with healthy cash position. The Group s cash and bank balances and restricted bank balance amounted to approximately HK$86.6 million as at 30 June 2017 (31 December 2016: HK$56.0 million). Its gearing ratio as at 30 June 2017 was 57.7% (31 December 2016: 54.8%), based on the interest-bearing borrowings of approximately HK$592.5 million (31 December 2016: HK$491.9 million) and the total equity of approximately HK$1,027.3 million (31 December 2016: HK$898.1 million). The Board believes that the Group s cash holding, liquid assets, future revenue and available banking facilities and the facility provided by the ultimate holding company will be sufficient to meet the present working capital requirement of the Group. Exchange rate exposure Most of the transactions of the Group were denominated in Hong Kong dollars, US dollars, Euro and Renminbi. For the six months ended 30 June 2017, the Group is exposed to foreign exchange risk arising from exposure in the US dollars, Euro and Renminbi against Hong Kong dollars. The management has continuously monitored the level of exchange rate exposure and will adopted financial hedging instruments for hedging purpose when necessary. The Group did not use any financial instruments for hedging purpose as at 30 June Financial guarantees and charges on assets 30 June 2017, corporate guarantees amounting to approximately HK$291.5 million (31 December 2016: HK$291.5 million) were given to banks by the Company for the provision of general banking facilities granted to its subsidiaries while corporate guarantees amounting to approximately HK$195.8 million (31 December 2016: Nil) was given to a bank in the PRC by the Company for the provision of general banking facilities granted to a company jointly owned by Dr. Lin and Madam Su. Besides, the general banking facilities granted to the subsidiaries of the Company and the company controlled by its controlling shareholders were secured by legal charges on certain properties owned by the Group with a total net book value of approximately HK$469.9 million (31 December 2016: HK$442.1 million) and approximately HK$280.5 million (31 December 2016: Nil).

38 Interim Report 2017 REALORD GROUP HOLDINGS LIMITED 37 LITIGATION During the period under review, Citibest and Guan Zhang, subsidiaries of the Group, are currently defendants in a lawsuit brought by a third party, 深圳市沪田利商貿有限公司 (Shenzhen Shi Hui Tian Li Business Trading Company Limited), alleging that Citibest and Guan Zhang are liable to settle outstanding payment of approximately RMB25 million and interest accrued thereon. As the litigation is awaiting for trial by the court in the PRC, the directors have not provided for any claim arising from the litigation, other than the related legal and other costs. CONTINGENT LIABILITIES Saved as disclosed in the Litigation section, the Group had no contingent liabilities. PROSPECTS The operating environment of the commercial printing and hangtag businesses will continue to be competitive in the coming years. The Group shall strengthen its business development team to achieve sales growth and increase market share, however, the intense competition in the Commercial Printing Segment shall limit the Group to pass the inflating operating cost to customers. Due to the continuous increase in production cost in the PRC, some of the customers shifted its demand to other developing countries in Asia-Pacific region, the operating environment of Hangtag Segment is even more challenging and we foresee that customers demand of hangtags, labels, shirt paper boards and plastic bags would keep on diminishing. The Group is in the process to set up the PRC operations of Motor Vehicle Parts Segment in Guangzhou. We expect that the PRC operations will effectively contribute to the business expansion of the sales and distribution of motor vehicle parts business. Besides, the Group is sourcing different brands of motor vehicle parts suppliers in order to broaden the variety of products offered to our customers. The e-commerce development in China is full of challenges and opportunities. The Group is in the process to develop the business-to-customer (B2C) e-commerce platform which involve the evaluation of the knit point between the e-commerce and traditional economy. The Group is in the process to develop the Financial Services Business, which would provide financial services including securities brokerage, margin financing, money lending and financial leasing services.

39 38 REALORD GROUP HOLDINGS LIMITED Interim Report 2017 PROSPECTS (CONTINUED) The Group had entered into an agreement with 5 other independent third parties to set up the Security Company to carry out securities businesses in the PRC. Through the Security Company, the Group could tap into the securities business in the PRC, which was considered as a strictly regulated industry. We believe the set-up of the Security Company, when materialised, represents a valuable investment opportunity for the Group to expand its securities services business and to enable the Group to exchange its business network and relationship in the PRC, and hence to gain a foothold in the PRC market. The stock market was volatile in 2017 and was exceptionally challenging to us. With the launch of the Shenzhen-Hong Kong Stock Connect Scheme, the preferential government policies and the establishment of the Security Company, we believe the Group would sustain a long term growth in the Financial Services Business. On 28 February 2017, the Group completed the acquisition of 60% equity interest of Realord Environmental Protection Industrial Company Limited (formerly known as Top Eagle International Trading Limited), which can diversify the business of the Group with the objective of broadening its sources of income. The Directors are optimistic about the prospects of the environmental protection industry and are of the view that it is an opportunity for the Group to further diversify the business scope of the Group through the acquisition. Looking forward, the Group will strike to explore for any potential real estate development or property investment opportunities. For the purpose of sustaining long term growth, we will also keep on exploring all potential opportunity to develop its businesses. DIVIDENDS The directors do not recommend the payment of interim dividend for the six months ended 30 June 2017 (2016: Nil).

40 Interim Report 2017 REALORD GROUP HOLDINGS LIMITED 39 DIRECTORS AND CHIEF EXECUTIVES INTERESTS AND SHORT POSITIONS IN THE SHARES, UNDERLYING SHARES OR DEBENTURES OF THE COMPANY OR ANY ASSOCIATED CORPORATIONS 30 June 2017, the interests and short positions of the directors and chief executives of the Company in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance SFO (Chapter 571 of the Laws of Hong Kong)) which were required to be notified to the Company and the Stock Exchange of Hong Kong Limited (the Stock Exchange ) pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO) or pursuant to the Model Code for Securities Transactions by Directors of Listed Companies ( Model Code ) and which were required to be entered in the register kept by the Company pursuant to Section 352 of the SFO were as follows: Directors interests in shares Long position in the Shares of the Company Number of Shares held Interest from Total interests options granted as % of Spouse Corporate under share Total the issued Name of Directors interests interests option scheme interests share capital Dr. Lin Xiaohui 1,080, ,731,518 1,080, ,891, % (Note 3) (Note 1) Madam Su Jiaohua 790,811,518 1,080, ,891, % (Note 2) Mr. Lin Xiaodong 1,000,000 1,000, % Mr. Yu Leung Fai 500, , % Mr. Fang Jixin 500, , % Dr. Li Jue 500, , % Notes: June 2017, Manureen Holdings Limited ( MHL ) was the legal and beneficial owner of 789,731,518 Shares. Since Dr. Lin Xiaohui owned 70% of the issued share capital of MHL, he was deemed to be interested in 789,731,518 Shares. 2. Madam Su Jiaohua, the spouse of Dr. Lin Xiaohui, was deemed to be interested in 790,811,518 Shares which Dr. Lin Xiaohui was deemed to be interested under the SFO as at 30 June Dr. Lin Xiaohui, the spouse of Madam Su Jiaohua, was deemed to be interested in all the shares interested by his spouse under the SFO as at 30 June 2017.

41 40 REALORD GROUP HOLDINGS LIMITED Interim Report 2017 DIRECTORS AND CHIEF EXECUTIVES INTERESTS AND SHORT POSITIONS IN THE SHARES, UNDERLYING SHARES OR DEBENTURES OF THE COMPANY OR ANY ASSOCIATED CORPORATIONS (CONTINUED) Save as disclosed above, as at 30 June 2017, none of the directors or chief executives of the Company had any interests and short positions in the shares, underlying shares or debentures of the Company or any associated corporation (with the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Division 7 and 8 of Part XV of the SFO (including interests and short positions which they are taken or deemed to have under such provisions of the SFO), the Model Code and which were required to be entered into the register required to be kept under section 352 of the SFO. SUBSTANTIAL SHAREHOLDERS 30 June 2017, the following persons (other than a director or chief executive of the Company) had interests or short positions in the shares and underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company under Section 336 of the SFO: Number of Shares/ Name of Long/ underlying Percentage of Shareholders Short position Capacity Shares held issued capital Manureen Holdings Limited Long Beneficial owner 789,731, % Note: 30 June 2017, MHL was the legal and beneficial owner of 789,731,518 Shares. MHL was owned as to 70% by Dr. Lin Xiaohui and as to 30% by Madam Su Jiaohua. Save as disclosed above, as at 30 June 2017, the directors are not aware that there is any party (not being a Director) who had any interests or short positions in the shares or underlying shares, which would fall to be disclosed to the Company under the Divisions 2 and 3 of Part XV of the SFO, or who was, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or any options in respect of such shares.

42 Interim Report 2017 REALORD GROUP HOLDINGS LIMITED 41 SHARE OPTION SCHEMES The Company operates a share option scheme (the Scheme ) for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group s operations. Eligible participants of the Scheme include the Company s directors and full time employees of the Group. The Scheme became effective on 10 August 2012 and, unless otherwise cancelled or amended, will remain in force for 10 years from that date. The maximum number of unexercised share options currently permitted to be granted under the Scheme is an amount equivalent, upon their exercise, to 10% of the shares of the Company in issue at the date of approval of the Scheme on 10 August The maximum number of shares issuable under share options to each eligible participant in the Scheme within any 12-month period is limited to 1% of the shares of the Company in issue at any time. Any further grant of share options in excess of this limit is subject to shareholders approval in a general meeting. Share options granted to a director, chief executive or substantial shareholder of the Company, or to any of their associates, are subject to approval in advance by the independent non-executive directors. In addition, any share options granted to a substantial shareholder or an independent non-executive director of the Company, or to any of their associates, in excess of 0.1% of the shares of the Company in issue at any time or with an aggregate value (based on the price of the Company s shares at the date of grant) in excess of HK$5 million, within any 12-month period, are subject to shareholders approval in advance in a general meeting. The offer of a grant of share options may be accepted within 21 days from the date of offer, upon payment of a nominal consideration of HK$1 in total by the grantee. The exercise period of the share options granted is determinable by the directors, and commences after a vesting period of two years and ends on a date which is not later than ten years from the date of the grant of the option but subject to the provisions for early termination of the Scheme. Unless otherwise determined by the directors at their sole discretion, there is no requirement of a minimum period for which an option must be held before it can be exercised. The exercise price of share options is determinable by the directors, but may not be less than the higher of (i) the Stock Exchange closing price of the Company s shares on the date of offer of the share options; and (ii) the average Stock Exchange closing price of the Company s shares for the five trading days immediately preceding the date of offer. Share options do not confer rights to the holders to dividends or to vote at shareholders meetings. At the end of the reporting period, the Company had 10,160,000 share options outstanding under the Scheme. The exercise in full of the outstanding share options would, under the present capital structure of the Company, result in the issue of 10,160,000 additional ordinary shares of the Company and additional share capital and share premium of HK$1,016,000 and HK$40,741,600 (before issue expenses).

43 42 REALORD GROUP HOLDINGS LIMITED Interim Report 2017 SHARE OPTION SCHEMES (CONTINUED) At the date of the interim report, the Company had 10,110,000 share options outstanding under the Scheme, which represented approximately 0.88% of the Company s shares in issue as at that date. The total number of shares of the Company available for issue under the Scheme is 63,535,311, representing approximately 5.5% of the Company s shares in issue. Movements of the share options under the share option scheme during the period are as follows: Exercise Outstanding Outstanding price as at Granted Exercised Lapsed as at 30 Exercise per share 1 January during during during June Name of Grantee Date of Grant Period (HK$) 2017 the period the period the period 2017 Directors Lin Xiaohui 20/5/ /5/ /5/2025 Su Jiaohua 20/5/ /5/ /5/2025 Lin Xiaodong 20/5/ /5/ /5/2025 Yu Leung Fai 20/5/ /5/ /5/2025 Fang Jixin 20/5/ /5/ /5/2025 Li Jue 20/5/ /5/ /5/ ,080,000 1,080, ,080,000 1,080, ,000,000 1,000, , , , , , ,000 4,660,000 4,660,000 Direcotors associates Lin Xiaohong 20/5/ /5/ /5/2025 Su Jiawen 20/5/ /5/ /5/2025 Lin Yixin 20/5/ /5/ /5/2025 Lin Jingming 20/5/ /5/ /5/ ,000,000 1,000, ,000,000 1,000, , , ,000,000 1,000,000 3,300,000 3,300,000 Other employees In aggregate 20/5/ /5/ /5/ ,200,000 2,200,000 2,200,000 2,200,000 10,160,000 10,160,000 There was no participants with options granted in excess of the individual limit.

44 Interim Report 2017 REALORD GROUP HOLDINGS LIMITED 43 DIRECTORS INTERESTS IN CONTRACTS Saved as disclosed in note 24 to the interim financial information, no other directors had a material interest in any contract of significance to the business of the Group to which the Company or any of its subsidiaries was a party during the six months ended 30 June DIRECTORS INTERESTS IN COMPETING BUSINESSES None of the directors or any of their respective associates has interest in any business that competes or is likely to compete, either directly or indirectly, with the business of the Group, or has any other conflict of interest with the Group. CORPORATE GOVERNANCE The Company is committed to maintaining high standards of corporate governance practices. In the opinion of the directors, the Company has compiled all code provisions (the Code Provisions ) in the Code on Corporate Governance Practices (the Code ) set out in Appendix 14 of the Listing Rules for the six months ended 30 June PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES For the six months ended 30 June 2017, the Company has not redeemed any of its listed securities. Neither the Company, nor any of its subsidiaries purchased or sold any of the Company s listed securities during the period. EMPLOYMENT AND REMUNERATION POLICIES 30 June 2017, the Group had an available workforce of approximately 153, of which around 48 were based in the PRC. Remuneration packages are generally structured by reference to market terms and individual merits. Salaries are normally reviewed on an annual basis and bonuses paid, if any, will also be based on performance appraisals and other relevant factors. Staff benefit plans maintained by the Group include mandatory provident fund scheme, share option scheme and medical insurance. The Group has established a Remuneration Committee with written terms of reference in compliance with the Code as set out in Appendix 14 to the Listing Rules. The Remuneration Committee has reviewed and determined the Group s remuneration policy, including the policy for the remuneration of executive directors, the levels of remuneration paid to executive directors and senior management of the Group. The Remuneration Committee comprises 3 members, namely Dr. Li Jue, Dr. Lin Xiaohui, and Mr. Yu Leung Fai. This Committee is chaired by Dr. Li Jue. MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS The Company has adopted the Model Code as set out in Appendix 10 of the Listing Rules as its code of conduct regarding securities transactions by the directors. All directors have confirmed, following a specific enquiry by the Company, that they have fully complied with the required standard as set out in the Model Code throughout the period under review.

45 44 REALORD GROUP HOLDINGS LIMITED Interim Report 2017 AUDIT COMMITTEE AND REVIEW OF FINANCIAL STATEMENTS The Group has established an Audit Committee with written terms of reference in accordance with the Listing Rules. The Audit Committee comprises 3 members, whom are independent non-executive directors, namely Mr. Yu Leung Fai, Mr. Fang Jixin and Dr. Li Jue. This Committee is chaired by Mr. Yu Leung Fai. The Audit Committee has reviewed with management about the accounting principles and practices adopted by the Group and discussed auditing, risk management, internal controls and financial reporting matters including a review of the unaudited interim results for the six months ended 30 June APPRECIATION On behalf of the Board, I would like to express its sincere gratitude to all our staff for their dedication and contribution, as well as to all our customers, suppliers, business associates and shareholders for their continuous support to the Group over the period. By Order of the Board Lin Xiaohui Chairman Hong Kong, 28 August 2017